Markets are still being held hostage to outcome of the raging debate over whether to nationalise banks or not. In the UK, US and throughout the global economy, the nationalisation question is having a drag effect on any attempted rallies and acting as a catalyst for any plunges.

Ironically, for once, it is the banks that are outperforming today with Barclays, Lloyds and RBS up 6%, 5% and 15% respectively. Financials in the UK are receiving a boost after RBS announced a restructure that will see it hive off underperforming non core areas. US markets received a pre market boost after the government announced it would be converting its preference shares to bring its total stake in the company to around 40%. Despite this dilution, CitiGroup shares are up around 8% on the day, possible due to the governments intervention falling short of full scale nationalisation.

This week, the US government will start a new stringent stress testing of its major financial institutions. Although ultimately a good thing, this act could have a further destabilising effect on financials as analysts speculate on the robustness of each bank.

The upshot is that investors are still left guessing as to the real financial strength of the banks. If the latest RBS led bad bank plans do not work, nationalisation may indeed by the only option left. Although the financial sector clearly doesn’t want this to happen, nationalisation may be the only course of action that can ultimately quell the rumours and speculation that has frozen credit markets since the whole crisis broke.

Dave Evans is a market analyst for BetonMarkets, the financial fixed odds betting firm. We do not endorse the information and analysis available in this comment and it is provided purely for information purposes only and is delivered as a personal view by the writer. Under no circumstances is the information in this comment to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. The investments referred to herein may not be suitable investments for all persons accessing this page. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. We accept no liability whatsoever for any direct or consequential loss arising from use of the information on this web page. Please see our Terms and Conditions.